Three years after the 2008 Credit Default Swap meltdown, journalists have enough information to piece together the story. Rather, the stories. But that doesnt mean that there are reassuring answerslike this will never happen again or that policy has changed, regulations made or human nature tweaked to become less greedy.
In fact, as Thomas Frank ends The Age of Enron published in Harpers in August, So let the next scandal ruin our neighbor, let it blackout entire regions of the country, let it throw millions out of workas long as we get a chance for our turn at the trough. Frank traces the beginning to the Enron scandal and Ken Lay. According to his vision, well have rolling blackouts in industries forever.
There are other opinions about the meltdown, which, lets be honest, will become grist for the Ph.D. mills for a long time unless a worse one happens to eclipse the 2008 fiasco.
One readable entry, The Big Short by Michael Lewis, is a good bet for your summer reading list, especially if youre still reeling, or still asking, Wha happened?
What happened, according to Lewis, is that nobody in the financial worlds in charge and nobody really understands what theyre doing. While Frank blames greed, arrogance, hubris and the all-too-human instinct to take advantage of opportunity when its waved in front of us, Lewis is more generous.
He believes in the innocence of humanity when faced with forces we dont understand. Lewis follows trader Steve Eisman, described as an oft-misunderstood, teacherly type. Hes sort of a prick in a way, but hes smart and honest and fearless, says one admirer. Rude ... obnoxious ... aggressive, says his wife. But sincere, and he figured out fairly early that the system was broken. Then Eisman figured out how to make money from the disruption. Lewis follows a raft of other folks, too. Hedge fund managers, guys setting up business in their garage, investors and traders. Throughout the book, Lewis talks about bettors in a game that nobody understands a casino run by the wizard of Oz. But, every time Toto gets close to pulling the curtain off the door, somebody makes a hundred million and the games just too good to call it a night.
And nobody, says Lewis, understands whats about to happen. And nobody asks. Theyre just buying and selling paper with no idea what the paper stands for.
Well, thats B.S.
Lots of people knew what the paper stood for. Lots of poor people were protesting, seeing their neighborhoods about to collapse. National Peoples Action (NPA) started working against predatory lenders in the 1990s. These lenders were the guys on the floor that made loans that were bundled and passed to the traders. By May 31, 2003, NPA had put enough pressure on Citi Financial to force Citis CEO to agree to a new program, Operation Neighborhoods First to stop the unfair lending practices. Everybody at the meeting got a t-shirt and I have mine right here. Unfortunately, NPA wasnt getting covered by the media, and bad PR is the only thing that would have really put teeth in the Operation. The media was only covering Wall Street, as usual, and the voices of the non-stock-holder were ignored they werent players, so they werent worth talking to.
This is the attitude of the media in general, by the way, and if youre in the flyover zone of the Midwest you know what I mean. The players were the New York firms buying the bad mortgages, or buying insurance that the bad mortgages would fail. By the time the mortgages failed in bunches, Wall Street had figured out how to insure the losses. When the players asked each other who would pay when the system collapsed, they guessed that it might be Germans or Chinese or Korean Farmers. Nobody real, at least in their world. Finally, they expected the government to bail them outthese players were too big to fail.
One of the unanswered questions in all thisand there are a lot of unanswered questionsis what were the politicians doing to help their districts where the lousy loans were being made? Lewis doesnt go into this much, but its obvious that the politicians were doing nothing, and if people like the neighborhood groups that comprise NPA complained to them, the complaints were ignored.
Dont you just hate that? You talk to your folks in Congress and theyre all, like, Yeah, yeah, yeah, Im on your side I see what you mean Ill get right on it. And then, it turns out that they work for Wall Street. In the film, The Yes Men Fix the World, the Yes Men call the victims of nuclear accidents Golden Skeletons. They might get sick and die, but are merely collateral damage if the nuclear industry is making money.
So which industry will victimize us next? Electric companies? Water? Petroleum? Food? Now, more than ever, we need to build local, resilient economies and support our neighbors.
Margot Ford McMillen farms and teaches English at a college in Fulton, Mo. She blogs at progressivepopulist.blogspot.com. Email: email@example.com.
From The Progressive Populist, September 1, 2011
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